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    12 Replies Latest reply on Oct 18, 2012 7:20 AM by phanio

    Merchant Services;

    iamsolo412 Adventurer

      Hello - I am starting an online E-Commerce business and will be taking credit card payments. I have contacted Bank of America to sign up for a merchant services account. Is this the best way to go, or is Paypal a better option, and why?

       

      Thanks for your responses......

        • Re: Merchant Services;
          Moderator Berta Guide

          Hi iamsolo412,

           

          Great question! 

           

          Anyone have an opinion on taking credit card payments online?  Please share your experiences with us.

           

          ~Berta

          • Re: Merchant Services;
            fshagan Adventurer

            A lot depends on how much volume you will be doing, and the costs associated with the various accounts.

             

            There are a lot of payment processors out there now touting low percentages, but there are "hidden" fees. I don't know BofA's merchant account details, but find out:

             

            • The percentage of each sale they take (typically from 1.9 to 3%)
            • The "Statement Fee" (typically $5 to $10 a month)
            • Minimum monthly fee (typically $15 to $20 per month, but waived if you process enough to pay at least that much in the percentage of each sale)
            • Online portal fee or payment gateway fee
              • This is sometimes not offered, so you use something like Authorize.net for your payment portal ... the page the customer goes to when actually entering their card information. Authorize.net will cost from $15 - $20 a month.
            • Annual fees (some merchant accounts have an annual maintenance fee).
            • PCI compliance fee, etc.

             

            BofA probably has a disclosure statement covering all of those; some of the on-line vendors with low percentage rates may not disclose all of them as transparently.

             

            Note that rates can vary depending on how much information you get at checkout; if the customer provides his address, the percentage taken from you may decrease. However, sometimes there is an "address verification fee" that gets tacked on, so your volume will determine if its worthwhile.

             

            Costco has an attractive merchant account with a 1.9% rate, $5 a month statement fee (waived for Executive level members), but I'm not sure what they do about a payment gateway on the web. You probably have to use something like Authorize.net.

             

            Paypal uses a slightly different system, with a monthly rate and a flat percentage plus .30 per transaction. You'll have to check with them, but if I recall there are plans at about $20 a month and 2.7%. That seems high, but remember everything is included (I'm actually using the PayPal no-monthly-fee level, and paying 2.9% - 3.5%, but so few of my sales are with a credit card that its cheaper than paying the various monthly fees for a merchant account).

              • Re: Merchant Services;
                Moderator Berta Guide

                Hi fshagan,

                 

                Thanks for all the helpful information on hidden fees that one might not think about or even realize existed! You provided us all with a mountain of helpful information.

                 

                ~Berta

                  • Re: Merchant Services;
                    amspcs Ranger

                    Hello people.  Sorry I saw this thread a little late (probably should have been posted under Merchant Services category). I have to cut in here since there is some serious and potentially very dangerous mis-information being passed on as fact here. First of all, the correct answer to the question(s) "is Paypal better/cheaper/easier/whatever than a traditional merchant account" is:  MAYBE.  Depends on  your unique circumstances, including (but not limited to) your projected volume, number of tickets processed, price points, product or business type, personal and business credit, geographical location, and much more.  Depending on the answers to these and other questions, Paypal may be an excellent choice for you.  Or, Paypal may be a catastrophic mistake for you.  No such thing as one-size-fits-all payment processing solutions.  You need to consult with someone with expertise in this area to find out which scenario applies to YOU. Secondly, anybody who discusses Paypal vs a traditional merchant account as if it were an apples-to-apples comparison doesn't know what he/she is talking about, and is doing a serious disservice to those who read those comments and misinterpret fiction as fact.  The fact:  Merchant Accounts and Money Movers (Paypal, Square, Google etc.) are totally different animals  in many important ways that the merchant needs to be aware of--ignorance or confusion in this regard can have disasterous consequences. We have published an article on the subject for those interested.  It deals specifically on the subject of Square, but as noted therein, the comments made in regards to Square also apply to Paypal. I strongly urge anyone who does not understand the important differences between  merchant processors and money movers to read this article by copying and pasting the following to your browser:  http://www.merchantservices-help.com/blog/square-payment/

                      • Re: Merchant Services;
                        fshagan Adventurer

                        amspcs, can you point to what you feel is "serious and potentially very dangerous mis-information being passed on as fact" in this thread? I don't see anything that would be "catastrophic" ... unless someone signs up for a contract term with monthly costs with a payment processor. Other than the contractual obligations, it is easy to change payment processors. My business account is with a different major bank, but they have a month-to-month merchant account. I would imagine BofA would be the same.

                         

                        You do raise some serious issues in your linked post about funds availability. I work with one client who tried Square, and had funds held for about 30 days. She is back to using her merchant account with Authorize.net, and Paypal for certain transactions.

                          • Re: Merchant Services;
                            amspcs Ranger

                            I'm on the run this morning, pressed for time.  Let me provide a short answer, you can request a follow-up if you need more understanding of the point I'm trying to make. When a merchant depends on cash flow to run their business, and they find the funds they need NOW to make payroll, pay suppliers etc.  won't be available for 30-60 days or whatever b/c they made the mistake of dealing with a money mover instead of a merchant account--that's catastrophic. When a merchant selling in higher risk/higher ticket environments gets blasted with losses (both their product and/or their service AND their money to boot) because they didn't understand (or were mis-informed) about the significant differences in chargeback/stop payment rules (or lack thereof) between merchant accounts and money movers....that's catastrophic. When a merchant commits fiscal suicide by foolishly doubling, tripling or more their payment processing expense, that's catastrophic if it costs them a valuable supplier, employee, or their business altogether. Let me say it again, hopefully this time a little more clearly: Money movers (Paypal, Square, Google, etc.) are a GREAT choice for SOME merchants.  That means, for example, weekend warrior who only need processing once in  a blue moon, a few weekends a year; vendors who do very little volume, say a couple hundred dollars a month; merchants with very low average tickets; merchants with very low risk chargeback or security exposure, etc. Money movers (Paypal, Square, Google, etc.) are a TERRIBLE choice for other merchant types. That means, for example, year-round merchants who process significant volume and/or average ticket amounts every week of the year; any merchant with high average tickets (I'd say $50 or greater); merchants with higher chargeback/risk exposure (certain product types, internet/mail order/phone order etc.)

                              • Re: Merchant Services;
                                amspcs Ranger

                                My apologies, I mis-pasted a sentence in my previous post that doesn't make sense.  The part about losing a supplier or an employee goes with the comments about cash flow, not the part of doubling payment processing expense.  Sorry, it was an afterthought I pasted in the wrong place. Also, you commented in your post:  "You do raise some serious issues in your linked post about funds availability. I work with one client who tried Square, and had funds held for about 30 days. She is back to using her merchant account with Authorize.net, and Paypal for certain transactions". I have to tell you, there's not much if any difference in regards to funds availability between Square and Paypal.  So by switching from Square to PP,  you didn't really solve the issue, you only traded problem providers.  What your client REALLY sounds like he needs is a merchant account with minimal monthly fixed fees, such as no monthly minimum, no annual fees, no contracts, no batch headers etc etc.  I think you and many others assume fees like these are part of all merchant accounts, which is not necessarily the case.  Solutions to fit unique needs are absolutely out there, one just needs to be pointed in the right direction.  Depending on the unique circumstances of your particular client, making a better choice in payment processors would provide him with the best of many worlds:  Lower expense, faster funding, more security, and so on. And BTW, authorize.net is NOT a payment processor, they are merely a gateway with is something totally different.  They work WITH a payment processor, they do not assume the role or function of a payment processor.          

                                  • Re: Merchant Services;
                                    fshagan Adventurer

                                    My client has always used Paypal, for going on eight years, as well as her merchant account through a major bank with Authorize.net as the gateway (I do know the difference between the two, BTW). Her frustration with Square was that they held money for 30 days, a problem she never had with Paypal. It was not a catastrophe, though, It was an irritation that caused her to look elsewhere.

                                     

                                    Interestingly, her bank merchant account held some funds when she processed just over $30k in three days. But the delay was only few days ... certainly less than 10. I don't know if that would be considered as "catastrophic" for some small businesses.

                                     

                                    I use Paypal exclusively now, and have never had funds held in the years I've been using them. But my credit card sales are low. I would expect you to know more of the "horror stories" from your clients, as I'm sure you get a lot of "refugees" from Paypal and Square who sign up for merchant services and Auth net through you.

                                      • Re: Merchant Services;
                                        jameschiam Adventurer

                                        If your monthly sales <$2K. PP & SQ will be good for yr business.  If >$3K. You should look for a Merchant Account which can do face to face, online and VT transaction: No monthly Min. No annual fee, No PCI fee, No cancellation fee and with NEXT DAY FUNDING.

                          • Re: Merchant Services;
                            selfdefender Adventurer

                            PayPal is an easy, albeit expensive, way to get your feet wet accepting plastic money. With only email, you are able to bill a customer, via their email, and pay $0.30 plus 2.89%, for a transaction. You are not required to purchase, or lease, a machine. Your on-line business notwithstanding, eventually you will want to be able to swipe a card for a sale. Before you do anything, open a second bank account to use exclusively for these various electronic transactions. Should that information ever get hacked, a thief will only be able to abscond with that daily balance. When settlements hit, transfer them. Bank of America has excellent online banking, and text alerts, to stay on top of this. In the beginning, you will find BOA to be an expensive merchant processor. When you achieve decent sales volume, and make use of the myriad of other services available to a business, the BOA fees will come down. If your budget is strict, there are dozens of direct and third party processors out there. Start with one of those, for a much smaller initial outlay of cash.. To make it simple, do not deal with any service that does not possess an A+  BBB rating, NO EXCEPTIONS. After determining a non-contract commitment, with no hassle or questions asked to cancel, ask them how much you will pay if you do not sell a thing in a month. Also determine if there are annual charges for anything else. This should tell you when you are ready to graduate from PayPal. All things being equal, I have found the newfangled, highly touted, smartphone applications to be lacking, compared to a standard, receipt spewing card swiper. Now, my grandson sells on his college campus, and there, his iPhone is working great for him. I sell on the move also, attending street fairs and flea markets, etc., My customers seem to prefer that printed piece of paper in their hand at the POS, so I use a wireless machine. Determine if your only sales will be inside your brick and mortar, and a telephone line for a connection is fine. If you will be selling outside, the only additional costs incurred should be for the machine's airtime, and not any more than $15.00 monthly. If you shop around will a little knowledge, you will succeed in securing the best deal for your circumstances. Just relax, don't rush into anything.

                            • Re: Merchant Services;
                              jameschiam Adventurer

                              Better for you to look for Authorize.net so you can use their Shopping Cart with a better rate too.

                              • Re: Merchant Services;
                                rhinos Wayfarer

                                Sams Club is the cheapest, and you can negotiate your rates and fees no matter who you sign up with.

                                • Re: Merchant Services;
                                  phanio Pioneer

                                  You have to shop around - period. If you bank with BofA - then there may be some advantages of having your merchant services with them - like quicker payments and relationship discounts.  But, you have to shop around and find the best deal for your business.  I have heard that paypal is easy to set up but hard to work with after that.

                                   

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